Select Comfort Corporation

About Select Comfort Corporation

Select Comfort has got your number. The firm's line of Sleep Number beds, which can carry hefty price tags, use air-chamber technology to allow sleepers to adjust the firmness on each side of the mattress, providing better sleep quality and addressing sleep-related problems, such as lower back pain. Select Comfort also offers foundations, frames, pillows, and a sofa bed. A leading bedding retailer in the US, Select Comfort operates more than 425 company-owned stores. The air-bed maker also sells through a company-operated call center, its own website, and on the QVC shopping channel. Select Comfort was founded in 1987 has grown to become one of the nation's leading bed makers and retailers.

Geographic Reach

Minneapolis-based Select Comfort operates company-owned retail stores in 45 US states. Its two largest markets are California and Texas, which combined account for 20% of its store base. The mattress giant distributes its products in the US and Canada, and in Alaska, Hawaii, and Australia through retail partners.

Operations

The firm operates two manufacturing plants (South Carolina and Utah), which supply beds on a just-in-time basis to its retail stores.

Sales and Marketing

Select Comfort spent about $398 million on sales and marketing efforts in 2012, compared with $317.5 million in 2011 and about $270 million in 2010. The year-over-year increase was primarily due to a 39% increase in media spending. The company advertises on television, radio, and in print, and is increasing its use of digital advertising.

Financial Performance

After a rough patch during the deep recession and housing crisis, which decreased the demand for beds (especially expensive ones), Select Comfort's sales and profits have rebounded sharply, posting record highs in 2012. Indeed, the company's sales jumped 26% in 2012 compared with 2011, to $935 million, after posting a 22% increase in the previous annual comparison. Driving sales was the addition of about 30 new retail stores, as well as increasing direct, online, and wholesale sales. Net income increased 29% over the same period to $78.1 million.

Strategy

While Select Comfort began as a direct marketer of its unique air-filled mattresses, over the years it has evolved into a multichannel retailer with company-owned stores in about 45 states. Retail store sales have grown to account for nearly 90% of Select Comfort's total sales.

With its mattresses starting at about $700 and approaching $4,000 for its premium product, it's not surprising the recession and housing crisis took the air out of the air-bed maker's sales. The steep sales decline put a halt to Select Comfort's aggressive expansion plans. While the company had hoped to grow to more than 600 company-owned stores throughout the US in coming years, it is instead looking to end 2013 with between 435 and 445 company-owned locations, having shuttered about 100 stores since 2007.

After entering the Canadian market in 2005, Select Comfort in 2007 partnered with two Australian companies to make and distribute Sleep Number beds and accessories in Australia and New Zealand. Additionally, the company's air mattresses are found in luxury motor homes, and in nearly all of Radisson's hotel rooms in the US, Canada, and the Caribbean.